If my company produced 600 chairs last year & each chair used an average 4 direct labor hours and an average of 3.5 boards of wood. The standard quantity of materials allowed was 3 boards of wood per chair at a standard cost of $15 per board. The actual cost was $14.50 per board and the actual cost of labor was $8.75 per hour. The company purchased was 2,000 boards.

Direct labor (3 hrs at $8.50 per hour) $25.50

Direct materials (1 board of wood at $15) $15.00

1) How would I calculate the materials usage variance and determine if it is favorable or not?

2) How would I calculate the labor rate variance and determine if it is favorable or not?

3) Is there a weakness or challenge of using standard values in the budgeting & planning proess?